Participating MBA students from the UC Irvine Paul Merage School of Business will have the opportunity to make up to $12,000 through the annual Polaris Investment Competition. This competition allows students to place real money in the stock market and experience real-world investing and decision making.
Students may keep part of their returns, within the $12,000 per student limit, provided they beat certain benchmarks.
The competition, which is unique among business schools, has students form teams of four to six members, where each group creates a proposal detailing how it plans to invest the money. Then, these proposals are scrutinized, and groups are ultimately selected based on the strength of their plan.
Selected teams receive a large sum of money, $50,000 for each member of their group, and are given great control over how they wish to invest the money.
The competition lasts the entire year from June until the following June and the team with the largest percentage of returns at the end is declared the winner.
Charles Martin, the chief executive officer of local investment management company, Mont Pelerin Capital LLC, provides the funds needed for the competition to operate yearly. Martin created the competition in 2004.
According to Michael Cancelleri, a graduate of UCI’s MBA program and senior vice president of Mont Pelerin Capital LLC, Martin created the program with the intention of providing students a real-world investment experience. He now helps run the program.
“In most MBA programs, you either get case studies or you’re invited to participate in simulations with non-real-world examples. Chuck wanted to provide students with the most real-world experience that they can have,” Cancelleri said.
According to Cancelleri, a large majority of teams make money and often outperform many institutional money-management firms. His explanation for their consistent success is simple.
“I think there’s a level of consistency in this investing that over the long run can be very successful throughout a student’s career or any person’s career,” Cancelleri said. “And certainly, the level of intelligence of those who participate in this competition is very high. There’s a high level of motivation to succeed.”
Peter Liu, a recent graduate of the UCI business school and owner of PacRim, an engineering company he created, participated in the 2007-08 competition and was captain of his group, the Executive Investment Team. His team took first place in last year’s competition with a return of 31 percent.
According to Liu, he is now forming an investment management company with several of his former teammates from the competition. Liu believes that MBA students should be encouraged to participate.
“It was valuable to learn how professionals do these sorts of investments … and to have a sort of ‘in the trenches’ experience which helps you gain some confidence,” Liu said.
Justin Vaicek, another recent graduate of the business school who also works for Mont Pelerin LLC, participated in the competition’s inaugural year.
Vaicek further espoused the benefits of the competition.
“This is a life-learning type of activity. You can never have enough experience with it. You just want to keep learning and developing your understanding of how the market works,” Vaicek said.
Vaicek attributed the great success of last year’s teams partly to a bull market in the upswing. With the recent economic downturn, Cancelleri said that it has been difficult for current teams to achieve the same level of success.
“That is why we run the competition for a full year … but students are still doing everything in participation that they need to do,” Cancelleri said.
Nonetheless, he says there have been some positive aspects from the economic trouble, in terms of the competition.
“It’s been a good lesson for them in that they realize investing is a long-term approach. You’re going to have these mark dips, ups and downs, but if you stick with it, you should show some positive trends.”
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